NY Coffee Prices Post 2-week Low But Then Recover

Coffee prices are exhibiting mixed trends, with Arabica rebounding after a recent plunge while Robusta declined, influenced by conflicting supply and demand signals. Bearish pressures include forecasts for rain in key Brazilian growing regions, potential lifting of US tariffs on Brazilian coffee, and projections for increased Vietnamese robusta output in 2025/26. However, prices are underpinned by persistent drought concerns in Brazil threatening the 2026/27 crop, critically low ICE coffee inventories exacerbated by US tariffs on Brazilian imports, and recent downward revisions to Brazil's 2025 crop estimates.

Analysis

December arabica coffee (KCZ25) saw a 1.14% increase, recovering from a 2-week low, while November robusta (RMX25) declined by 1.85%, reflecting a mixed market. This divergence is driven by short-covering in arabica and forecasts for rain in key Brazilian growing regions, which could partially alleviate recent dry conditions. However, the market remains sensitive to the immediate weather outlook.

Despite some recovery, coffee prices are underpinned by significant long-term supply concerns. Critically, ICE-monitored arabica inventories fell to a 1.5-year low of 447,773 bags last Friday, exacerbated by US tariffs on Brazilian imports causing American buyers to void contracts and tighten US supplies. Furthermore, persistent drought in Brazil's Minas Gerais, receiving only 1% of historical average rain last week, threatens the 2026/27 coffee crop, a concern amplified by NOAA's 71% likelihood of a La Niña event.

Conversely, bearish pressures stem from robusta supply increases, with Vietnam's 2025/26 coffee production projected to climb 6% year-over-year to a 4-year high of 1.76 MMT. Additionally, discussions between Brazil and the US regarding a potential lifting of the 50% tariff on Brazilian coffee could ease import costs and potentially increase supply to the US market, offsetting some of the current inventory tightness. Global coffee exports for the current marketing year also rose 0.2% year-over-year, indicating adequate overall supplies.

Key Decisions for Investors

• Monitor Brazilian weather forecasts closely, especially for Minas Gerais, as persistent drought conditions pose a significant risk to the 2026/27 arabica crop.
• Track developments regarding US-Brazil trade tariffs, as a potential lifting of the 50% tariff could significantly impact US import dynamics and global coffee prices.
• Evaluate the divergent supply outlooks for arabica (tight inventories, drought risk) and robusta (increasing Vietnamese production) to inform hedging or directional strategies.